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2009 Online Holiday Shopping Trends: Interview with comScore's Andrew Lipsman

Due to last year's financial crisis, the 2008 holiday shopping season was pretty bad. The start to this year's season is up a couple of percentage points. So, we're up from awful. comScore's Andrew Lipsman observes the worst seems to be behind us.

But some demographics are holding onto their money tighter than others. For many customers, paying for shipping is a dealbreaker. They will abandon shopping carts if they see that charge.

Below is our rapid-fire interview that offers you fascinating insights into who's doing what with his/her money this holiday season.

This Year's Outlook: Better than Last Year's 'Awful'

Larry Chase: ComScore is projecting a 3% increase year-over-year for the November-December holiday season for '09?

Andrew Lipsman: That's right. Starting the first three weeks of the season so far, we've seen about 2% growth. We do anticipate it accelerating slightly to 3% as we go throughout the season.

Last year during the holiday season, the bottom really fell out of consumer spending behavior. The comparisons to a year ago are simply more favorable.

Shoppers Want Sellers to Cover Shipping

LC: I noticed in the dataset that people are actually using coupons a little less than last year.

AL: They're not actually using them less, but they are looking at all the deals available to them.

Free shipping is certainly one that we have highlighted as being particularly important. Consumers have come to expect it. The average consumer wants to feel as if they're getting a deal on most transactions.

It can also work out well for retailers because if they have a specific minimum spending threshold that can get the consumer to spend more, this can help offset any margin attrition.

LC: So, if they get to the end of the shopping-cart process and they find out that they are still going to get dinged for shopping, is that a dealbreaker?

AL: It's definitely a risk, but so many retailers are offering free shipping that if you aren't, consumers will look elsewhere if they don't get the deals they are expecting.

More Shoppers Spending Less

LC: Are more people spending less money over fewer visits this year?

AL: The average spending per buyer is down pretty substantially. There are more people online, but they are going to be more cautious before they make an actual purchase. The underlying trend for ecommerce over the past year is that we are definitely seeing almost 20% growth in new buyers to the channel.

That has helped prop up the growth rate even though we have been marginally negative. Had we not been bringing new buyers into the channel, we'd probably be seeing significant negative growth rate.

LC: Is that at the expense of brick and mortar?

AL: Online as a retail channel has absolutely gained share. Brick-and-mortar stores were seeing pretty significant negative growth rates, maybe an 8% decline, compared with 1% or 2% for online.

We estimate that online now represents about 8% of corresponding retail categories, those where you would purchase online as well as offline. We exclude food, gas and auto because those typically aren't purchased online.

Smackdown: Amazon vs. Wal-Mart

LC: Do you think this slugfest between Wal-Mart and Amazon is going to suck all the oxygen out of the room at the expense of other online retailers?

AL: I think Amazon and Wal-Mart are going to benefit from the perception that they are cost leaders. Not all of their success may come at the expense of other retailers, however. Some retailers have been pushed out of the market in this downturn. The spending that used to occur at those retailers is now consumed by Amazon or Wal-Mart.

Buyers Use Amazon as Shopping Search Engine

LC: Are people using comparison-shopping engines, or are they going directly to their destination sites?

AL: The comparative search engines have been pulling back a bit in their spending on paid search. Comparison sites are relatively flat, which seems counterintuitive. You'd think you'd see significant growth.

What's interesting about Amazon is that it is becoming [consumers'] first search engine when they know they're in the purchase funnel.

LC: So they use Amazon almost like a baseline?

AL: Yes, Amazon is becoming a default option. Consumers know that the experience is good; they're probably going to get a pretty good price, so they may start their shopping process there.

Deal or No Deal?

LC: In your panel of 2 million opt-in participants, do you get the sense that online shoppers are being conditioned to expect deals before they'll pull the trigger on a purchase?

AL: Absolutely.

LC: Is that happening earlier in the holiday shopping season?

AL: We actually have data from our friends at ShopLocal.com that show the number of deals from retailers throughout the season. We are seeing consistently higher rates week by week for the number of deals per retailer.

It gets more and more competitive earlier and earlier in the season. That may even be more pronounced during an economic downturn when there's more competition for those finite dollars.

Invitation-Only Sales Move Online

LC: One tactic that I find fascinating is the exclusive invitation-only luxury site. Is the closed sale, only open to invited guests, a trend you're seeing on your radar screen?

AL: It's something that serves a particular niche, which has disposable income.

I don't know if they'll become as mainstream as other retail sites, but they are dealing with significantly higher-end luxury goods. They're still very expensive but represent a great deal.

Gilt Groupe, ideeli and RueLaLa are three of the luxury goods retailers that are beginning to see traction in this space.

(See resource list at end.)

Smartphone as Credit Card

LC: In your report, it said the iPhone was significantly responsible for boosting m-commerce, correct?

AL: M-commerce is not yet taking hold strongly. The future is really as a payment system. It's not too far off where we can use our mobile devices as credit cards.

LC: Payment system in real space or cyberspace?

AL: I'm thinking of this as being applied in the offline environment.

PayPal Increases Share of Wallet

LC: You're seeing an increase in PayPal transactions. Why?

AL: PayPal offered some unique incentives in the last holiday season. Consumers really respond to deals; so this showed absolutely that if you give them the right incentives, people will change their behavior.

These discounts at several major retail sites made PayPal more attractive. We saw a big jump in PayPal's share of wallet during last year's holiday season. PayPal wasn't able to sustain those huge spikes, but it was able to sustain a pretty high share of wallet afterwards.

Six-Figure Baby Boomers Tighten Up

LC: I also found interesting in your report that the age 45-plus demographic making over $100,000 is spending less because their portfolios are so wounded.

AL: There's been a lot of wealth destroyed in the past year. So, we do see a higher level of savings among older consumers. There's a pretty stark disparity between the under-45 crowd and the 45-and-older crowd in the $100,000-plus segment.

Those who are under 45 and in the high-income bracket are actually spending more and growing spending online, but we are seeing a decline in the older consumer. They are more reserved and restrained.


Andrew Lipsman is Director of Industry Analysis for comScore.

Websites for the invitation-only sales Andrew mentioned are Gilt Groupe, ideeli and RueLaLa.

This interview was edited and condensed by Sr. Editor Janet Roberts.